The political economy crossroads: An interview with economist Ann Pettifor

Ann Pettifor is a renowned political economist and a prolific journalist and writer. Born in South Africa, her work in the realm of international economy has drawn considerable praise, most notably her 2006 book, The Coming First World Debt Crisis, which successfully predicted the banking crash of the following year. She is currently director of Policy Research in Macroeconomics (PRIME), a network of macroeconomists and political economists, and has previously worked with a number of governments around the world in the area of debt cancellation, and as an advisor to the UK Labour Party. Jericho’s editor, John Bartlett, was able to speak to her in Edinburgh.

Jericho: At the Institute for New Economic Thinking’s (INET) 2017 conference we have heard a lot about dystopian futures and visions of progress, but you have stressed that the resources we have on Earth are finite. How far can we go with the resources we have – and is it somewhere we want to go?

Ann Pettifor: My view is that all of the utopian talk of automation and robots taking over our jobs is based on the notion that the Earth’s assets are infinite. This in turn assumes that there is no limit to the ability of human beings to plunder the Earth for its assets, and to go on doing so ad infinitum without any consequences.

I grew up in a small gold mining town in South Africa. It happened to have the deepest gold mines in the world when I was growing up, so it was a booming town. If you go there today it’s a ghost town. Why? Because we exhausted the reserves of gold that we had beneath the Orange Free State. It taught me that we can’t go on believing in the limitless potential of the Earth to keep on providing for us.

People have been talking about ‘peak oil’ for a long time. It may seem like we can keep on finding new sources of oil, however the truth is that when we do, they are harder and more expensive to extract.

So, for me, thinking about automation in terms of man having an immense innovative capacity to restore, duplicate and replicate the Earth’s assets is delusional and dystopian. I think that we have to start framing our economics in terms of the finite nature of resources.

I think you’re right, there do seem to be some fundamental flaws in the way we are thinking about macroeconomic challenges, particularly with regard to international cooperation. How do you see the future of economic unions around the world playing out? Are these things of the past?

No, that story is over. And it’s over because the globalisation crowd believed that international cooperation was not necessary and markets could be relied upon entirely to manage flows of both capital and labour across borders. For the cheerleaders of globalisation, politicians and public authorities intervening in that process would simply mess it up.

The G8 was founded at a time of crisis to coordinate responses to crises between the big powers. Yet in reality, everything is left to the invisible hand of the markets. What is happening is that society is reacting, saying: “Sorry, politicians, but you don’t seem to want to protect us from the market forces that have taken our jobs, got us into debt and caused a massive financial crisis – and you say that this is nothing to do with politicians but entirely the work of the market.” So people are abandoning them.

Consequently, we have seen the absolute collapse of social democracy, which is now entirely discredited across the whole of Europe. They have been defeated time after time, starting with Greece, and now the German social democrats have got their lowest rate of support.

This is because politicians have simply shrugged their shoulders and said, “It’s nothing to do with us, it’s the fault of the market.” In turn, people have reacted by saying that they want strong leaders that will protect them from market forces. They want protectionism, not deals or cooperation, and are now saying: “We’re building walls between us and the rest of the world.” That’s the reaction we could have expected to get from globalisation.

I say that because some people did predict that, most notably Karl Polanyi in his 1944 book The Great Transformation. He explained the rise of fascism and how people move towards strong men to protect them from market forces and the total liberalisation and deregulaton of the global economy. People were told: “Sorry, these markets and the financial sector are the masters of the global economy and you are subordinate to it.”

Society is saying; “No. It’s time to subordinate markets to the interests of the people.” Unfortunately, the way that is expressed is often reactionary and protectionist in an irrational way. It can be racist and can lead to fascism. And that is exactly what Polanyi predicted globalisation would do.

It’s interesting that you say that, given your own record of prediction. If we turn our attention to Brexit and the impending ‘no deal’ scenario. What could this mean for Britain and for Europe?

I was a Remainer, but I am deeply critical of the Eurozone’s economic framework. I think it’s based on the gold standard of the 1930s and is doomed to failure. But for me, the economic question about Europe was not as important as the political one.

The decision to vote for Brexit was a major stimulus to the far-right, both in the United States, who immediately took comfort from the vote, and in Europe with Marine Le Pen, for example. It reminded me of the failure of the social democrats in the 1930s to work with the communists to defeat fascism. It was the same political misstep, which had catastrophic consequences.

So, what we find is that the Nigel Farages and ‘Little Englanders’ of this world are putting up barriers to protect British culture, economy and incomes. The problem is that it isn’t Europe that’s responsible for those problems; it’s the city of London and Anglo-American macroeconomics which has inflicted this upon us.

Europeans are very committed to their welfare states, and the British in Europe worked terribly hard to undermine the British welfare state by introducing competition and privatisation. That didn’t start with the Germans, French or Spaniards: it began with the Brits and Americans.

So I’m deeply concerned by the economic impact of Brexit. We don’t quite know what’s going to happen, but surely it is a form of suicide to demand free trade with the rest of the world while denying free trade with the 28 states within Europe? That is a real nonsense! I’m really very worried about it.

A big part of me – but it is probably the optimistic part of me – believes that Brexit will never happen, because we will walk to the cliff edge and then be sensible and realise that we shouldn’t jump into the swirling ocean of American liberalisation. I fear that the real aim of the Brexiteers is to align with Trump’s so-called free traders – because they’re not, of course – and American capitalism.

That is the ugliest capitalism of all because it will destroy our national health service, because the Europeans are committed to welfare systems and social welfare in ways that the Americans are not. The fact that we now align ourselves with American capitalism and imperialism I think is deeply, deeply disturbing.

When you see fascist simmerings in the US – fascists being given platforms and not being attacked by the president – this is enough to keep me awake at night.

John co-founded Jericho in 2017 and currently edits the site. His interests include social policy, international relations, Latin American politics and sport. He graduated from the University of Bristol in 2015 and completed an MSc at the University of Oxford in 2017.

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